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Internet Retransmitter of TV Signals Is Not Cable TV Service Eligible for §111 License

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A company that takes broadcast television signals off the air and streams them to subscribers over the internet is not a cable television service provider that is eligible for a statutory license granted to cable services under federal copyright law, the U.S. District Court for the Southern District of New York ruled Feb. 22 (WPIX Inc. v. ivi Inc., S.D.N.Y., No. 1:10-cv-07415-NRB, 2/22/11).

Granting a motion for a preliminary injunction, the court found that the copyright owners were likely to succeed on the merits of their copyright infringement claims and that application of a four-part test created by the Supreme Court supported enjoining the internet streaming service.

Service Retransmits Broadcast TV Signals Over Internet.

Ivi Inc., which operates a website associated with the domain name ivi.tv, offers a service through which it captures broadcast television signals and makes them available as streaming video to paying subscribers located in the United States who have installed the ivi software on their computers. The service captures the broadcast signals of television stations based in New York, Los Angeles, Chicago, and Seattle, and makes them available to any U.S. subscriber.

A group of major television programmers--including commercial broadcast networks, producers of educational programming, major motion picture studios, several local TV stations based in New York and Seattle, and Major League Basebal--sued ivi, alleging infringement of their copyrighted works.

The copyright holders moved for a preliminary injunction halting ivi's streaming of their programming.

Service Not Permitted Under Section 111 Cable License.

Granting the preliminary injunction, the court found that the copyright holders had established a likelihood of success on the merits of their infringement claims and that the streaming was causing irreparable harm.

Judge Naomi Reice Buchwald at the outset rejected ivi's argument that it was entitled to make use of a compulsory license offered under 17 U.S.C. §111(c)(1) to cable television service providers.

Section 111 states:

[S]econdary transmissions to the public by a cable system of a performance or display of a work embodied in a primary transmission made by a broadcast station licensed by the Federal Communications Commission … shall be subject to statutory licensing upon compliance with [record keeping and royalty fee requirements] where the carriage of signals comprising the secondary transmission is permissible under the rules, regulations, or authorizations of the Federal Communications Commission … .

The same provision defines “cable system” as:

a facility, located in … the United States, that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations … and makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members of the public who pay for such service.

The Copyright Office also requires cable systems availing themselves of this compulsory licence to submit a $100 annual fee.

The court noted that ivi claimed the right to retransmit broadcast signals under Section 111 of the Copyright Act; however, it also claimed, as an internet service, to be exempt from the rules and regulations that cable TV providers are subject to under the Communications Act of 1934.

Section 111 has been in effect since the 1980s, the court noted, and during the life of the provision, numerous retransmission technologies have been evaluated as to the applicability of the statutory license. Emphasizing the “historic context, statutory text, and administrative record” surrounding the Section 111 license, the court noted that in no case has a technology “been allowed to take advantage of Section 111 to retransmit copyrighted programming to a national audience while not complying with the rules and regulations of the FCC and without consent of the copyright holder.”

Reviewing the history of cable TV and the origin of the Section 111 license, the court said that the statutory licensing provision had been crafted by Congress in order to balance the interests of compensating copyright owners against development of the cable industry. Furthermore, Congress also acted with the knowledge of the FCC's regulation of the industry pursuant to the Communication Act. The court said:

Congress … did not legislate on a blank slate. The statutory license did not constitute the only regulation of cable systems. Congress was well aware of the significant role that the Communications Act and the rules of the FCC played in regulating the cable industry, and anticipated that the compulsory licensing system and the Communications Act would complement each other.

With this context in mind, as well as the significant differences between the structure of ivi's service and cable TV services, the court said that it was impossible to conclude that “Congress intended to sanction the use of a compulsory license by a company so vastly different from those to which the license originally applied.”

The court also gave weight to statements by the Copyright Office that rejected the notion that a service like ivi's constituted a cable TV service. These statements included a series of regulatory proceedings from the 1990s that, among other things, determined that satellite TV service providers were not eligible for the Section 111 cable license.

In addition, the court cited to statements made by the Copyright Office since 1997 that specifically rejected the argument that internet retransmission services may qualify for the Section 111 license. Reviewing a decade's worth of rulemaking proceedings, the court concluded that the Copyright Office has “made clear” that the Section 111 license applies to entities that are regulated by the FCC. In the face of such statements, the court found it significant that Congress has not acted to contradict the Copyright Office's views.

Also rejected was ivi's argument that a reading of the plain text of the statute supported its argument that it was a cable system. For example, it was not clear to the court that ivi both received signals and made secondary transmissions--it could be said that the end user's internet service provider was the party making the retransmission. In any case, the court said, “[i]t cannot be seriously argued” that Congress intended “that anyone with a computer, Internet connection, and TV antenna can become a 'cable system' for purposes of Section 111.”

Having concluded that ivi was not a cable TV service provider under Section 111, the court did not reach the question of whether it was subject to the cable TV rules and regulations promulgated by the FCC pursuant to the Communications Act.

Supreme Court's Four-Part Test Applied.

The court went on to apply the four-part test for preliminary injunctions set forth in eBay Inc. v. MercExchange LLC, 557 U.S. 388, 78 USPQ2d 1577 (2006) (72 PTCJ 50, 5/19/06). The considerable weight of the evidence that ivi was not eligible for the Section 111 license and that its retransmissions were without authorization, and thus infringing, satisfied the first part of the test, which asks whether the moving party has established a likelihood of success on the merits of its claim, the court said.

Next, the court found irreparable harm resulting from multiple points of view:

(1) destruction in value of licensed programming as a result of greater access to the programming should ivi's service continue; (2) disruption of advertising models and loss of revenue since viewers will now be able to watch television programs when they are shown in Seattle, New York, Chicago, or Los Angeles, and thus potentially at times other than when they are available from local broadcasters with local advertising; (3) interference with distribution agreements that content owners enter into with broadcasters that limit the times, geographical areas, and mode of permitted distribution; (4) interference with plaintiff's licensing of their own and other websites to perform their content; (5) disruption of plaintiff's use of foreign markets to grow profits; (6) loss of control over content and exposure to viral infringement as a result of ivi's distribution of their programming via the Internet without any means for plaintiffs to ensure adequate security measures.

These sources of irreparable harm to the plaintiffs were balanced against the fact that an injunction would require ivi to shut down. While the court recognized this as a hardship, it concluded that it was “not a legally recognized harm.”

“It is axiomatic that an infringer of copyright cannot complaint about the loss of ability to offer its infringing product,” the court said.

Finally, the court found that it was in the public interest to preserve the policy judgments balancing the public's interest in access to programming against the incentivizing creation of content through protection of creators' exclusive rights. The court rejected the argument that the public would be harmed by any anti-competitive result of an injunction since copyright law by its nature gives copyright owners monopoly rights.

Advocacy Group Faults Ruling; ivi Service Halted.

Soon after the court's injunction order, public interest advocate Public Knowledge issued a statement expressing disagreement with the court's ruling.

“We are disappointed that Judge Buchwald chose to shut down ivi at all, much less so early in the legal process. Her decision showed clearly the ambiguities in current law and regulation which online video providers like ivi face,” according to the statement by Public Knowledge spokesman Art Brodsky. “If competition to traditional cable service is to develop in the online distribution section, then the [FCC] and Copyright Office are going to have to move quickly to update their rules to conform to the realities of new technology and consumer choice.”

On Feb. 22, the home page of ivi's website displayed a statement to subscribers that the court's order compelled it to close “most of [its] broadcast channel offerings,” but that the company planned an appeal.

“We believe the court made an error in the ruling and will be appealing the decision supported by many public interest groups. But we cannot do it alone. In return, we ask that you support them,” the statement said. In the interim, the company said it would not be sending invoices for suspended services, but that it expected to be able to restore those services to subscribers and add more channels over time.

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